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Jan 25, 2008 9:43 pm US/Mountain
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Economic Stimulus Plan Gets A Reality Check
DENVER (CBS4) ―
I'm no economist, but I'll say this, the proposed economic stimulus package feels like an election year gimmick, and everyone in Washington seems to be congratulating themselves for it.
Dana Perino (White House Press Secretary): "We believe that this is a very good bipartisan compromise."
It's true. Both parties came together in lightning speed to get this $150 billion package through the House. But I have to wonder, how much economic stimulus will it actually deliver?
President Bush: "The incentives will lead to higher consumer spending and increased business investment this year."
Rep. Nancy Pelosi (D- CA, House Speaker) : "to put money in the hands of those who will spend it right away, to inject demand into the economy, to help create jobs."
That's the spin, but here are some things to think about. If this package is aimed at preventing the looming recession, many economists think it's not going to work.
In fact, it's very likely the so-called tax rebates won't be in the hands of consumers until late May at the earliest. By then the economy may already be well into recession.
But there is more to the story. To the extent that recessions get cured when businesses expand operations and create jobs, this tax rebate plan may just be an illusion.
Companies are smart enough to know these rebates create a temporary spike in consumer demand. Businesses are not going to invest in new hires and new equipment for that.
What about the tax cuts for businesses? Some economists say the temporary nature of those tax cuts has an equally temporary effect. A nice bump this year, at the expense of next year.
The U.S. Senate still has to cut the final deal, and some Senate Democrats want to add things like extending unemployment benefits and bumping up food stamps benefits, Republicans vow to resist. The bottom line, the business cycle is likely going to do what it does regardless of this quick fix stimulus package.
While the president and congress pat themselves on the back for having done something, the only thing we'll know for sure that they've done is to further widen the federal deficit.
Source Articles:
Deal Reached on Economic Stimulus PackageMost Workers Would Receive at Least $300 Tax Rebate (washingtonpost.com)
Congress Unites on Economic Stimulus Package (thestreet.com)
Tentative Deal Reached on Stimulus Plan (nytimes.com)
US tax rebate to take six months to kick in (ft.com)
Widening federal deficit looms over economic stimulus talks (azcentral.com)
CBO Sees $250 Million Deficit (AP)
Treasury's Paulson repeats strong dollar, market-determined rate policy (forbes.com)
Whose Stimulus Makes the Grade? (washingtonpost.com)
Fed moves to shore up economy - Surprise rate cut helps calm investors, slows galloping losses on Wall Street (delawareonline.com)
Stimulus Plan Lifts Stocks (smartmoney.com)
Economic Slowdown Could Widen U.S. Budget Deficit, By Michael M. Phillips (online.wsj.com)
A Fear That the Cure Could Be Poison (nytimes.com)
Economy pact by House leaders, Bush could mean tax rebate checks by May; Senate OK needed (AP)
Bush's Stimulus Flop (cato.org)
Why I Am Not Using the R-word This Time (cato.org)
President Bush's Plan for Economic Stimulus (brookings.edu)
Bernanke Backs Calls for Quick Action (businessweek.com)
Seniors Must Not Be Forgotten in Economic Stimulus Plan (prlog.org)
Economic stimulus package puts President Bush, House leaders on same page (chicagotribune.com)
Q&A: What's in the Tentative Stimulus Deal? (npr.org)
The Stimulus Swindle: by David Sirota (alternet.org)
Bloomberg pans economic stimulus package (newsday.com)
Economists differ on predictions of recession (losangeles.bizjournals.com)
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